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Thrilling Thursday – Nasdaq 7,000 Is Our Next Summit

Can we really go higher?

Bullish Sentiment is literally off the charts and only 7,826 (11.4%) out of 68,119 investors polled by Earnings Whispers are currently bearish about the markets.  Usually you might thing that's the sign of a turn but if my daughter's softball team were going up against the Yankees, you might see similar sentiment results in favor of the Yankees and that does NOT mean betting against the Yankees is a smart move – just because it's the contrarian play. 

Sometimes, the crowd gets things right though not this time – this time the crowd is full of idiots who are chasing a trend off a cliff but other times, you shouldn't just be a knee-jerk contrarian.  Meanwhile, as I've been saying since Nov 29th's "Record High Wednesday – We Will All Be Billionaires," if they are going to keep giving money away in the markets – who are we to turn it down?  The Money Talk Portfolio we looked at that morning was "only" up 70.7% for the year and, this morning, those untouched positions are now up 80.9% less than two months later.

We cashed our other portfolios in and started new ones on Jan 2nd and our $500,000 Long-Term Portfolio is already up $25,000 (5%) in 3 weeks – a pace that will make us $1Bn in 14 years (at 75% annualized) and of course that's ridiculous and unsustainable but that's what you are paying for when you buy into a market that is basically up 5% for the month as well.  While earnings are "pretty good" so far, they are (as I mentioned in yesterday's Report) bolstered by a weak Dollar as well as the stimulus of a $1.5Tn Tax Cut, which consumers have already borrowed against to spend last Christmas.

Looking forward, we are now counting on the repatriation of Trillions of overseas Dollars to boost the markets into 2018 but, just like the rising income inequality in America, the benefits of the repatriation are concentrated to the Top 1% Corporations and, in fact, just 16 companies account for half of all overseas funds:

  • Apple holds $269 billion in cash and investments.
  • Microsoft holds $143 billion.
  • Alphabet holds $107 billion.
  • Cisco holds $76 billion.
  • Oracle holds $71 billion.
  • Coca-Cola holds $50 billion.
  • Amgen holds $41 billion.
  • Qualcomm holds $38 billion (spoken for in NXP merger, if Broadcom doesn’t win).
  • Facebook holds $38 billion.
  • Gilead Sciences holds $41 billion.
  • Intel holds $27 billion.
  • IBM holds $25 billion.
  • Pfizer holds $24 billion.
  • Merck holds $23 billion.
  • Procter & Gamble holds $21 billion.
  • Pepsico holds $20 billion

While  this is, indeed great news for these companies and their shareholders, what about their competition?  What about the 4,500 public companies that haven't got a penny overseas and aren't being rewarded for years of tax evasion?  FaceBook (FB) has $38Bn to crush SnapChat (SNAP) with.  Coke (KO) and Pepsi (PEP) have $70Bn to play with and they can go to war with each other or simply drive Dr Pepper (DPS), whose entire market cap is just $17Bn, completely out of business.  Do you think Trump's regulators will care if it's "unfair competition"?

Image result for trump monopolyWhat we have here is the Oligopolists consolidating their power and sure, we can bet on those companies to do very well down the road but beware if you hold stock in their competition – this is not unlike the game Monopoly, when your competitors start the game with 10 times more money than you – you are not likely to win and will likely go bankrupt as you try your best to move around the board without landing on one of their hotels.

So, believe it or not, 2018 is going to become a stock picker's market and there will be losers as well as winners and the problem with that is currently the indexes are not pricing in any losers at all – so the valuations are stretched across the board.  Yesterday, in our Live Trading Webinar, we discussed Cisco (CSCO) and, while they are one of my favorite stocks and will be bringing back $76Bn from overseas, they are not cheap at $42.30 as that's a market cap of $208Bn and they "only" make $10Bn a year, so 20 times earnings.  The repatriate cash is not "new money" – it's already on their books and has already been earned – it's just being moved around.

Instead we prefer in that space Finisar (FNSR), who are a $2Bn company at $19 and made $250M last year for a p/e of 8 and they are growing revenues and profits at a 15% annual pace.  THAT is the kind of company we like to put in our portfolios and we did add FNSR to our Options Opportunity Portfolio as well as our Long-Term Portfolio already.  Again, it's not that we don't like, even LOVE CSCO – it's just that they are not on sale – so why buy them?

Also in yesterday's Live Trading Webinar, we played with the Futures and our trade of the day was a long on the Russell Futures (/TF) as they dipped in the afternoon and we made a very quick $280 in our trading demonstration and the Russell went on to hit 1,610, good for gains of another $700 per contract for those who stuck with it so congratulations to all who attended yesterday.  

Last Wednesday, our Webinar play was a long on Coffee (/KC) Futures at $120 and this morning we're testing $125 but we took the money and ran at our usual $123.  Coffee contracts pay $375 for each $1 move so up $1,125 per contract was a nice gain for our Members and, if you are just a webinar watcher – I'd say it's a bit greedy not to take some off the table at $125 and keep tight stops on the rest as the main reason we like tradin coffee is because it keeps pulling back and giving us new entry opportunities though, long-term, we certainly expect it to move much higher than it is now.

For the Futures-challenged there's a Coffee ETF (JO) which is subject to a bit of decay but is still playable at $15.21 and the way we would lay out a trade would be:

  • Sell 5 JO 2020 $16 puts for $2.40 ($1,200)
  • Buy 10 JO 2020 $14 calls for $3.75 ($3,750) 
  • Sell 10 JO 2020 $20 calls for $1.95 ($1,950) 

That nets you into the $6,000 spread that's $1,210 in the money for $600 so your upside potential is $5,400, which would be a 900% return on cash and the margin for selling 5 short 2020 $16 puts is about $1,500 and your ultimate obligation is to own 500 shares of JO for $16 ($8,000) if it's assigned to you but then you can turn around and sell the $14 calls for $3.75 and your basis drops down to $12.25 so the risk of being long on JO at net $12.85 (the $600 cash presumed lost as well) is a risk that compares very favorably with the potential $5,400 reward so we'll add that one to our Options Opportunity Portfolio and see how it plays out.

Of course, going long just one Futures contract at $130 and running up the same 25% to $162 would pay $12,000 and the Coffee contracts only require $2,310 in margin and, even better, we go in and out and in and out and make money on all the little move in between so, if all goes well, we'll make much, much more than $12,000 per contract over the next couple of years in the Futures – which is why we teach our Members how to trade them in our Webinars! 

Sadly, it's January 25th and our month of free trade ideas for non-Members is drawing to a close but here's a bonus trade that seems very silly to me with the Dollar so low (see yesterday's notes) and gold so high:  Barrick Gold (ABX) is a quality miner with a very low cost of extracts (under $800) and, with gold hitting $1,360 this morning – it seems hard to imagine that Q4 earnings won't be better than last year's Q4, when gold averaged under $1,200 per ounce.  ABX spiked to $20 after Q4 earnings last year so $15 seems like a bargain at the moment.

A simple way to get bullish on earnings is to pick up the Feb $15 calls for 0.55, which is 0.50 in premium but that's all the risk you have and there is no margin requirement.  If ABX breaks up ahead of earnings and the calls hit $1, you can sell half and then carry no risk into the earnings and any move up from there is all bonus money.  We are carrying longer-term spreads on ABX in both the Long-Term Portfolio and the Options Opportunity Portfolio and we have high degrees of confidence in them.  

Another fun gamble on Gold is micro-miner Northern Dynasty (NAK), which we also hold in the OOP and that's just $1.60 but pure speculation as they don't mine at all but they are trying to get regulatory approvals and partners to begin mining up in Alaska.  What we like about NAK is that getting permits to strip mine the land and pollute the rivers is much, much easier under the current administration so yay Capitalism!  

Meanwhile, if this rally doesn't calm down – we're going to need a bigger chart (we are shorting Nasdaq Futures (/NQ) below the 7,000 line with tight stops above as well as S&P Futures (/ES) below the 2,850 line.

 


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  1. Good Morning.



  2. We have Trump saying that he will testify under oath in the early evening only to have his lawyers walk it back 2 hours later saying that he spoke hurriedly! WTF… What's next – Trump declares war on N. Korea and starts a nuclear strike only to have the Joint Chief of Staff declare later that the president acted hurriedly and that they apologize the the families of the 10M dead Korean. And that the president is spending the weekend at Mar-A-Lago…. 


  3. The VIX might spike quickly!

    https://www.lrb.co.uk/v40/n02/donald-mackenzie/short-cuts

    That was almost certainly an important element in the 1987 crash. Market participants who had ‘portfolio insurance’, an automatic hedging strategy based on the Black-Scholes-Merton model, needed to sell large numbers of S&P 500 futures contracts quickly, and that selling pressure fed through into the underlying stock market, contributing to a fall in share prices of around 20 per cent – the worst ever single day in the history of trading in the US. If all those market participants, amateur and professional, who are betting on the VIX remaining low were all at once to change their minds and try to liquidate their positions, a disruption on the scale of the 1987 crash couldn’t be ruled out.

    Perhaps those betting that the VIX will remain low are aware of the feedback loop, and know that it could suddenly go into reverse: in other words, they are consciously taking a substantial risk in trying to squeeze the last few dollars out of what has been the best bet of the last five years. Or maybe they don’t perceive themselves to be taking a big risk, and the loop doesn’t explain why the fear gauge remains so low. Maybe investors in the US simply aren’t frightened. That would be worrying for different reasons. It reminds me of the widespread feeling, in the run-up to the global banking crisis, that markets were enjoying a durable ‘great moderation’, free of boom and bust, bubbles and crashes. The time for the rest of us to get scared is precisely when market participants aren’t.


  4. Maybe this time it's different:

    http://ritholtz.com/2018/01/valuation-ratios-households-businesses/

    Ratio of household net worth to income

    Looks scary to me!


  5. Good morning, All!

    The webinar replay is now available!

    https://youtu.be/yJ1LQVKvwT4


  6. ~~CTL -upgraded to Outperform from Sector Perform at RBC Capital Mkts.

    Continue to believe the dividend is secure, and if so, this might be the last chance to lock in a 12% yield.


  7. ~~Helios & Matheson (HMNY) files for $400 mln mixed securities offering.

    Stock opening sharply lower.


  8. Is it my imagination, or didn't WHR guide lower; apparently no one believes them.  I cannot operate in this environment.


  9. Good morning!  

    Note the trades above but I'll restate JO so I can send it out as a Top Trade Idea and also the earnings play on ABX – that seems like easy money.

    Last Wednesday, our Webinar play was a long on Coffee (/KC) Futures at $120 and this morning we're testing $125 but we took the money and ran at our usual $123.  Coffee contracts pay $375 for each $1 move so up $1,125 per contract was a nice gain for our Members and, if you are just a webinar watcher – I'd say it's a bit greedy not to take some off the table at $125 and keep tight stops on the rest as the main reason we like tradin coffee is because it keeps pulling back and giving us new entry opportunities though, long-term, we certainly expect it to move much higher than it is now.

    For the Futures-challenged there's a Coffee ETF (JO) which is subject to a bit of decay but is still playable at $15.21 and the way we would lay out a trade would be:

    • Sell 5 JO 2020 $16 puts for $2.40 ($1,200)
    • Buy 10 JO 2020 $14 calls for $3.75 ($3,750) 
    • Sell 10 JO 2020 $20 calls for $1.95 ($1,950) 

    That nets you into the $6,000 spread that's $1,210 in the money for $600 so your upside potential is $5,400, which would be a 900% return on cash and the margin for selling 5 short 2020 $16 puts is about $1,500 and your ultimate obligation is to own 500 shares of JO for $16 ($8,000) if it's assigned to you but then you can turn around and sell the $14 calls for $3.75 and your basis drops down to $12.25 so the risk of being long on JO at net $12.85 (the $600 cash presumed lost as well) is a risk that compares very favorably with the potential $5,400 reward so we'll add that one to our Options Opportunity Portfolio and see how it plays out.

    Sadly, it's January 25th and our month of free trade ideas for non-Members is drawing to a close but here's a bonus trade that seems very silly to me with the Dollar so low (see yesterday's notes) and gold so high:  Barrick Gold (ABX) is a quality miner with a very low cost of extracts (under $800) and, with gold hitting $1,360 this morning – it seems hard to imagine that Q4 earnings won't be better than last year's Q4, when gold averaged under $1,200 per ounce.  ABX spiked to $20 after Q4 earnings last year so $15 seems like a bargain at the moment.

    A simple way to get bullish on earnings is to pick up the Feb $15 calls for 0.55, which is 0.50 in premium but that's all the risk you have and there is no margin requirement.  If ABX breaks up ahead of earnings and the calls hit $1, you can sell half and then carry no risk into the earnings and any move up from there is all bonus money.  We are carrying longer-term spreads on ABX in both the Long-Term Portfolio and the Options Opportunity Portfolio and we have high degrees of confidence in them. 

     

    Meanwhile, things are selling off a bit at the open but who can tell with this crazy market?

    I added 4 more /DX because it was either that or capitulate at 88.30 so now 14 at 89.76 but I'll be dumping the extra 4 very quickly and cutting back more than that if we get to 89 as this Dollar weakness is out of control.  Hopefully that was a blow-off bottom but clearly the Administration thinks our monetary policy is a tool they can use to goose the markets.

    HMNY maybe another buying opportunity for those who missed the entry:

    Our LTP play is:

    If we can get the same price, I'd like to add them to the OOP.

    Meanwhile, /TF testing 1,600 again so time to flip long for the bounce (with tight stops below) and time to put very tights stops on this morning's index shorts.  


  10. SGYP +5.1% (announces FDA approval of TRULANCE (Plecanatide) for the treatment of irritable bowel syndrome with constipation (IBS-C) in adults)

    Now 5% lower.

    I QUIT!


  11. Good Morning… this one is for Pharmboy — does the thesis change now?

    Heavy trading volume but it was sold off and is now down 5%

    FDA OKs Synergy Pharma's Trulance for IBS-C; shares up 16% premarket

    The FDA approves Synergy Pharmaceuticals' (NASDAQ:SGYPTRULANCE(plecanatide) for the once-daily treatment of adults with irritable bowel syndrome with constipation (IBS-C).

    TRULANCE was first approved in the U.S. a year ago for the treatment of chronic idiopathic constipation.

    Shares are up 16% premarket on average volume.

    Previously: Synergy Pharma files U.S. marketing application for expanded use of Trulance; shares ahead 1% (March 27, 2017)


  12. Phil, StJL – Trump, lawyers, WTF?? - Video of the day, week, month, year?? The timeline is set up on a platter for even mindless zombie to understand up to 3:38, from then on a former federal prosecutor as well as a member of the Watergate prosecution team, tells why an obstruction of justice charge against POTUS IS A SLAM DUNK, and how it will probably go down. Must see and Tweet TV, enjoy.


  13. I think I'm catching on – the rule seems to be the Dow is not allowed to go red.  That seems to put the brakes on sell-offs. 

    I have 3 long /TF now at 1,595.8 - we'll see how they go.   Still stuck in Dollar hell as I was busy posting when it turned back down.  

    Valuations/StJ – Way out of control and saying "it's not as bad as 1929 or 1999 really doesn't make it OK."   

    WHR/Baron – Things are totally nuts, aren't they?  

    And CAT is down on good guidance and a 35% beat:

    LOL Baron – you just have to ignore the noise and make long-term plays on quality stocks.  

    Obstruction/Naybob – I think that is a slam dunk but what will the GOP-controlled Congress do to derail prosecution?  The oligarchs learned their lesson from Nixon – you want to keep the lying, cheating bastard in power – you can't just replace him with anyone.  Trump is their guy and life has never been better for the 1% – they don't want justice – even for the sake of maintaining the facade of Democracy.


  14. Did you say there are a lot of movies coming out soon that could help IMAX? 


  15. Phil,

    Any new thoughts on IMAX before earmings ? Just broke what seemed to be a base at 20. Only recent negative press – besides possible competition from homegrown Chinese clone – was Jaffray downgrade (1/10). 

    Thanks


  16. IMAX/Jabob, 8800 - Yes, lots of good films coming.  What's freaking people out is Chinese competition as that's their main future growth prospect and they have been pouring a ton of money into building a future and will make, at best, $1 per share this year but possibly as low as 0.60, which makes them expensive, even at $20 if there's no growth to look forward to.

    Out of /TF as they failed 1,600 but back in if we get over that line.  

    Dollar back to 88.30 angry  That's down 4% for the month!


  17. Phil, any idea what's been driving HOV down? Off 30% in the past month or so. I'm guessing the tax law is bad for them.


  18. I thought you liked IMAX? 


  19. Dollar could have a long way to go before we see real support:

    It's a joke to talk about the markets doing so well when you tank the currency by 20%. What the Dow's performance in euros for example. Or gold for that matter…


  20. Wasn't the dollar weaker for most of Obama's presidency?

    Does that mean we should discount the market gains for him too?

    I am not a TRump fan but I don't understand why you are so focused on the $$$ making the stock gains less meaningful then when Obama was the POTUS? 


  21. OK, good time for a 5% Rule study session:

    The Dollar is down from 103 and it based at 80 from 2013 -2014 and raced up to 100 (25%) before consolidating around the weak retrace (96) until 2016, when it legged up again.  Since we've been moving in 4s (5% of 80), we'd have to call this top a rejection of 104 or possibly, just consider 104 an overshoot of the proper move to 100 and, given the current weakness – that's more likely the case.  

    So, up from 80 we would have 84, 88, 92, 96 and 100 as significant lines and 92 was the strong retrace and that didn't hold for long so we're back to watching 84 and 88 as simply the 5% and 10% lines above 80.

    So it would be tragic if 88 doesn't hold as we'd have a clear path back to 84 but now let's look at the BIGGER picture:

    Basing off 80 in 1995 we gained 50% to 120 during the Dot Com boom and then the long collapse after 9/11 but we fell to 80 again with a 20% (8 points) overshoot of the 40-point drop that held so 80 remains a very solid base for the Dollar and the fall from 120 to 80 (40-points) would be expected to have a weak bounce to 88 – which you can see happening in 2008 and 2010 and then a strong bounce to 96, which we hit in 2015 but now we've failed the strong bounce line and we're testing the weak one very quickly.

    So, if the Dollar is bullish, the weak bounce line (88) will hold and we should quickly recover the weak bounce line of the fall from 96 (89.6 – 20% of that fall) and the next important goal is the weak bounce line (20%) of the fall from 100 to 88 so 12 points is 2.4 is 90.4.  We need to get over that very quickly (by Friday) to remain bullish on the Dollar.

    HOV/Jet – Yeah they are in the Northeast, where the lack of tax deduction on homes is killing people.  A lot of tempting builders out there but tricky to call at the moment. 

    IMAX/Jabob – Just because I like a stock doesn't mean I can't be critical.

    Trump is not inspiring much confidence in Davos.  In fact, he's realizing people's worst fears.  I hear Fox news and Bloomberg and CNBC talk about the "respect" the President commands at a business gathering but that is a completely different World than the one being painted by the foreign press covering the event (all fake news, I guess). 

    This is the same kind of denial we had in the Financial press when Bush II was clearly destroying this country and its reputation yet the markets kept acting like all was well and there would never be any consequences.  

    Dollar/Jabob – 9/11 had our Fed lowering rates on their own and that made the Dollar weak but Obama was sworn in Jan 2009  and the Dollar was pretty rangey for his first term and then it got crazy strong as he made America actually great and now Trump is f'ing it all up.  Anyway, what on Earth does that have to do with the current situation – or are you one of those "what about" people now?  


  22. Phil:ALK

    What price would you get REALLY EXCITED about ALK?  Looks like it's heading to $55 or less.  What's your take on the increase capacity issue on valuation?  It was pretty low already.


  23. Phil / ALERTS – this year for some reason I am not getting alerts texted to me.  I get the emails OK.

    I"ve checked my profile, and my cell no. is correct and the.  Can you help on this?


  24. ALK/DC – I think $60 is very exciting as that's $7Bn and they make $800M, even in an acquisition year so, once the synergies kick in, they should be able to push for $1Bn and well over $6 per share. 

    In the LTP, we have 5 short ALK 2020 $60 puts we sold for $6.20, now $10.10.   Let's sell 5 more of those ($5,050) and buy 10 of the 2020 $45 calls for $18.80 ($18,800) and sell 10 of the 2020 $70 calls for $6.80 ($6,800) and that's net $6,950 new Dollars but we collected $3,100 previously so we're now in the $25,000 spread for net $3,850.

    In the OOP:

    • Sell 3 ALK 2020 $60 puts for $10.10 ($3,030)
    • Buy 5 ALK 2020 $60 calls for $10.50 ($5,250) 
    • Sell 5 ALK 2020 $70 calls for $6.80 ($3,400) 

    That puts us in the $5,000 spread for a net $1,180 credit so our upside potential is $6,180 (523%) and our worst-case is owning 300 shares of ALK for $18,000 less the $1,180, of course.  TOS says the margin is a very gentle $1,815 on the 3 short puts so it's a nice, margin-efficient play.  


  25. Davos / Phil – What's fake news, the talks about confidence on Fox or the fact that Trump is viewed as a clown or a fool by the rest of the world! Look at the speech that Macron gave yesterday. Even if you don't agree with the guy, you have to see some intellectual capacities that is totally lacking in Trump.


  26. I don't know about the what about people.

    I am just asking why the $$ being around 90 makes this rally "fake" when the $$ being lower from 2009-2015 didn't make the rally fake?


  27. 3 day rule (after an big move) in effect for ALK for me… To revisit on Monday!


  28. What's fake/StJ – That's the point.  We know what's fake but so do conservatives, who KNOW that the NYTimes or any other publication that doesn't agree with Fox News' view of the World is fake – and they don't care what your fake facts are to support things.  This is what happens when you spend 40 years defunding education and creating an entire population that "thinks with their gut" rather than their brains.  

    The truth is now a matter of opinion and we really are living in Orwellian times, which is joyous for those who accept the party dogma and a complete nightmare for those who like to think critically.

    Fake/Jabob – See, you are a great example.  There are Dollar charts right above your comment showing that the Dollar was not, in fact, weaker for Obama than it was for Bush or is now for Trump, who's Dollar dive is already exceeding Obama's worst year – without the excuse of a massive market collapse.  Yet, somehow, regardless of the contrary facts right in front of you – you continue to maintain your position that Obama was worse. 

    "What about" refers to the Conservative mental Jiu Jitsu that immediately seeks to distract gullible voters by taking every obvious sin committed by Trump and his team and steering it to "what about" something that Obama or Hillary were accused of doing – even if, like your Dollar example, it has absolutely no basis in fact and can be disproven in 2 seconds by anyone with the most basic understanding of Google.

    ALK/StJ – I think the move is grossly wrong – would hate to miss it if it bounces.  The near doubling of the $60 puts is what motivated me to call it here.  


  29. I see the dollar from 2009—2015 being at or below where we are today… are you F ing blind.

    look at the chart again. those are the facts.

    I am not saying anything about Obama or hillary.

    geez.. 

    are you cranky because you kept saying how much you love cash and it keeps getting weaker?





  30. Phil,

    What do you think about SYF ? I was thinking about the below set up so wanted to get your thoughts on it. 

    Sell Jan 2019 30 Puts

    Sell Jan 2019 32 Puts 

    Sell Jan 2019 50 Calls

    Thanks as always

    Pat


  31. Thinking about raising some cash using SYF hence the above set up. Happy to buy SYF if hit in the 32-30 range. 










  32. PHIL/  ALK

     

    Starting to bounce


  33. The 35 most amazing lines from Donald Trump’s impromptu press conference



  34. Phil, can I get your thought on the following trade from the STP in GOOGL:  

    If you want to be more "conservative", you can back up the short March $1,080s at $42 with the 2020 $970 ($200)/1,040 ($164) bull call spread at $36 so if the short $1,080s expire worthless, your gain is the remaining value on the spread + $6 or, if GOOGL goes up, you have $76 of upside protection while you roll them along. 

    That's a fun trade, let's do 3 in the STP.  I have the 2020 970/1050 BCS 3x that I paid $42.83.  I also have three of the MAR 1100 calls and I collected $37.33.  As the stock shot up I added 2x the 800 Puts for 19.25.  With GOOGL at 1182, I've pocketed $2,200 with the potential to collect $24000 in 2020.  The position is currently showing a $20k loss.  Would you do anything now.  Thanks in advance.


  35. The bold text is a copy of your original comment in blue


  36. $ – dollar – FWIW- my currency trader friend texted me last night saying the $ broke key support at 90 so long EUR/USD.


  37. Holy cow, Dow up 200!  

    Dollar/Jabob – Ah, so you can't read a chart?  Or maybe you don't get the concept.  The Dollar is priced wherever it is at the start of the President's term and THEN you see if it goes up or down from there to decide if it contributed (in relative terms) to any market movement from that point forward.  So yes, the Dollar was about 89 when Obama was sworn in, bottomed out at 75 at some points and was at 102 when he handed the ball to Trump.  So down 15% and up 15% during his term but mostly up in the last 3 years.  Trump has, so far, had the Dollar go from 102 to 88, which is down 14% so no worse than the worse drop Obama had but the point is it's been 100% downhill from the day he took office so it's 100% been beneficial tail-winds to the market but again – I ask you – what on Earth does what happened under Obama have to do with a current discussion of Dollar weakness and market strength?  

    As to CASH!!!  As you've seen we've very quickly re-deployed it since 1/2 as it no longer made sense to hold Dollars on the sideline.  We went to cash in early December, when the Dollar was rallying but, when it broke back below 92 – it was time to trade our Dollars for stocks again.

    SYF/Pat – We had this discussion:

    Submitted on 2017/08/17 at 12:20 pm

    SYF/Pat – It's a good business and they are reasonably valued but I worry about mobile payments taking over down the road.  Actually, the tech is there for retailers to face ID you in their own database and auto-charge your account.  They'll have their own loyalty programs not so much tied to cards and the banks will begin to offer more direct services that private cards now offer but it's a next 10-year thing.  GE doesn't get rid of things they can grow.  

    Still, you can sell 2019 $28 puts for $3 to net in for $25 and leave it at that or add the $28 ($5.50)/$32 ($3.60) bull call spread for $1.90 and you still net in for $26.10 (14% off), worst case.  

    So at $30 last year, I didn't mind them but now we're way over my goal, so not as interesting to me but still not a terrible long-term business if you don't mind dealing with a possible pullback.  2020 $30 puts are $2.30 now and the $35 ($9)/40 ($6.50) bull call spread is $2.50 so net 0.20 on the $5 spread is a nice return – as long as you really, Really, REALLY want to own them at $30 and won't bail out just because they drop 20% from here, back to the 200 dma at $32.   

    On your spread, I take it that was BUYING the 2019 $32 calls but I don't see the point if you are just selling $50s for $1.25 against the $9.50 calls as your still paying net $40.25 (not including the $1.05 put sale) and may as well just buy the stock.  On my spread, I'm paying net $37.50 and, with no cash out of pocket, I would be THRILLED to spend $2.50 to roll down to the $30 calls (now $12.30) if the stock gets cheaper and THEN I could sell short-term calls for income against my $10 wide spread.  

    As to raising cash – I don't see how selling the Jan $30 puts for $1.05 raises cash.  If you REALLY don't mind owning them at $31 (22% off) - you can sell the 2020 $35 puts for $4 and that gives you 4x more cash with little change in margin requirement.  And, if you're not super-confident they'll hold $35 in two years – why on earth would you play them at $40?

    ALK/Lala – Wow, that was timely but maybe it's BECAUSE I made the call that it bounced?  Hard to tell – especially on an OOP trade, which gets published over at Seeking Alpha.  Still, that was my point to StJ – whatever the reason for the bounce, when I see a stock I KNOW I like (my facts) go on sale for no particular reason – I am willing to take my chances to take advantage of a panic sell-off.

    Kudos to DC for his very timely inquiry!  

    GOOGL/Options – First of all, that's an old trade we killed ages ago so none of this is official for the STP.  You have (and correct me if I'm wrong) 3 2020 $970/1050 bull call spreads ($12,849) and you sold 3 March $1,100 calls for $37.33 ($11,199) and 2 unknown date $800 puts at $19.25 ($3,850) and GOOGLE is at $1,180, which puts the short puts $80 in the money but the spread is 100% in the money so, if all goes flat the spread pays $80 ($24,000) and you take the same loss on the short calls and profit from the puts. 

    The problem with this is what if GOOGL blasts higher on earnings.  10% from here is up $120 to $1,300 and that would very much suck so I would not risk earnings.  You can go 2 ways here, you can cut your short calls to 2 and then add 1 to the long spread and then do a 2x roll higher on the short puts or just DD on the whole thing.  What I would do is:

    • Sell 3 2020 $970 calls for $310 ($93,000)
    • Buy 8 2020 $1,150 calls for $200 ($160,000) 
    • Sell 8 2020 $1,300 calls for $136 ($108,800) 

    That's net $41,000 in pocket so far.

    • Roll 3 short March $1,100 calls at $97 ($29,100) to 3 short May $1,200 calls at $57 ($17,100)
    • Roll 3 short 2020 $1,040 calls at $265 ($79,500) to 5 short May $1,200 calls at $57 ($28,500) 
    • Roll 2 short ??? $800 puts to 6 short 2020 $1,050 puts at $81.50 ($48,900) 

    That set is net $14,100 plus whatever it costs to buy back the 2 puts you sold (probably $2,000) and now you still have about $25,000 in pocket and 8 2020 $1,150/1,300 bull call spreads covered by 8 short May $1,200 calls and those can be rolled even to the Jan $1,340 calls, at which point your 2020 spread would be $120,000 in the money.

    See how much fun these can be?

    Dollar/Pstas – Hopefully it holds long enough for the Fed to turn it around next week.


  38. Spread on SGYP lurking there somewhere?  It is just so hard to decide in this market what the heck to do.  A third of my positions expired in January and I and 2/3rds in cash, and wanting to make plays like the ALK play above, but in the back of my head I'm waiting for the market to tumble enough to feel confident getting in these positions. 


  39. JO spread – not sure what happened after you posted that trade idea, but TOS is now quoting mid $3.15, nat $4.30 on the spread. The bid/spread on the options of JO are so wide that it makes it a difficult trading vehicle. 

    If anyone was filled at $1.80 on the spread I will shut up, but………

    Looks like too many professionals are involved in this site, or I need to change the brand of wacky backy I'm smoking.


  40. winston—do you mean you couldn't buy the call at the bid and sell the call at the ask and sell the put at the ask?


  41. Thanks Phil that was really helpful 


  42. Winston, I got the Long calls and short puts at the prices Phil noted in the trade idea. The short calls though…no. That order will sit open for a bit I think. 


  43. Jabo / I rarely buy spread trades by legging into them – been burnt too many times in the past on filling one side and not filling the other. So I normally offer the mid point that shows up on TOS. I did not even bother to try and fill the trade because the numbers were so 'off' from what Phil had posted. 

    A we have noted in the post, many of Phil's trades get bid up on the day he posts them. Probably better to let the excitement and try another day. Interested in other people's experience.


  44. Winston:

    Sometimes, because of the popularity of Phil's site, single investors jump without thinking.  On the ALK trade, in particular, I noticed someone executed trade(s) right at $12 instead of bidding lower, or at least the mid. It looked like the trade could have been made for much less.  Unfortunately, once the price was set ,nothing would execute for less than $12 (plus).  Unfortunately, it's probably not possible to train everyone who follows Phil's site to bid first rather than jumping on whatever Phil says.  Annoying!


  45. Greg /or Phil -  ALERTS – this year for some reason I am not getting alerts texted to me.  I get the emails OK.

    I"ve checked my profile, and my cell no. is correct and the.  Can you help on this?

    Thanks


  46. Phil;/GOOGL Trade;  Thanks that was very helpful.   Those are the 2020 800 that I currently have.  With regard to your suggested changes I think I would want  to be more conservative and keep less cash.  Would you suggest a higher strike on the short May calls, lower strike on the short Puts or fewer Puts.  Thanks


  47. Phil,

    How do you feel about Newell Brands (NWL), they got a major smack-down today on talks of business lines restructuring and 3 directors leaving.


  48. Phil/DX – did you take some off the table?


  49. dclark – there is no accounting for incompetence, but it still seems strange nonetheless. 

    Currently the JO 2020 $16 puts are bid $1.50 / ask $2.40 (the price Phil had the put sale at).

    It's no great drama, just move along to the next trade idea, or wait for the prices to come to you. But I would scratch the trade from the OOP.


  50. Any idea whats moving Oil back down?


  51. Oil, gold, & silver all down on the USD spike. 

    So follow up question- any ideas on what's moving the USD?


  52. Tumble/Rperi – I know what you mean but the cash keeps going down in value so, defensively, we have to play something. I'm not going back to SGYP as it's too speculative.  It was fun when we were up 200% in our portfolios but, starting back from scratch in an uncertain market – I don't want to be in anything I wouldn't be THRILLED to double down on if the market drops 40%.

    Goal on /DX – dropping back down to 8 @ 89, still down $1,000 per.

    JO/Winston, OOP – It's because after I post a spread, people put in stupid bids.  It's a 2020 so certainly no hurry to fill – not likely JO is going to go flying up.  $14s were filling at $3.80 this morning and the $20s were $1.50 so that is net $2.30 ($2,300) and the $16 puts were $2.40 ($1,200) to that's net $1,100 overall – not as good as we wanted but I don't mind having just the long calls and the short puts and waiting for a better price to fill out the short $20 calls since the whole point is we're bullish, right?

    And what Jeff said!  

    You're welcome Pat.  

    Training/DC – Yes, very annoying.  

    Alerts/Batman – Sorry about that, I am going to have the guys look into it.   I don't have a clue myself other than what you tried on the profile.  

    Conservative/Options – Don't forget you don't have to DD.  I like the new set-up and if you cut it to, say 6 longs and 4 shorts, it becomes way more conservative and uses less margin but sucks up the money in pocket.  As to the puts, they balance the calls so a non-issue unless you think GOOGL will really crash but sound like cutting them to 4 as well might be the trick to make you more comfortable.  

    Selling 3 $970s for the same $93,000 and buying 6 of the spreads raises that net to $54,600 credit.

    The big change in part 2 is you roll 3 2020 $1,040s to 1 short May $1,200 for $73,800 and then if you buy back the 2020 $800 puts for $20 ($4,000) and sell just 4 of the 2020 $1,050 puts for $81.50 ($32,600) then you are still putting $9,400 in pocket and you have 6 2020 $1,150/1,300 bull call spreads with 4 short May $1,200 calls and 4 short 2020 $1,050 puts as your play.  Keep in mind, of course, that if the May calls expire clean, you get to sell Oct whatevers for $20,000+ and then March and Oct again so $60,000 more coming in while you wait unless GOOGL goes higher and puts your spread in the money for $90,000.  Rich man's problems…

    NWL/Lotter – Interesting 20% drop today to cap of a disastrous 6 months.  I think this sums it up:

    After spending billions of dollars to scoop up rivals and build a conglomerate of household products, Newell Brands Inc. NWL -19.92%is reversing course, looking to unload brands and close half its factories.

    The company sells Sharpie markers, Elmers glue, Rubbermaid containers and Graco baby strollers. It more than doubled in size in 2016 when it acquired Jarden Corp., adding Yankee Candle, Mr. Coffee machines and Coleman camping gear to its portfolio.

    But on Thursday, the Hoboken, N.J., company said it will focus on nine core consumer divisions and look to shed nearly everything else, including all of the company’s industrial and commercial businesses. Among the brands to go will be Rawlings baseball gloves and Goody hair accessories.

    They way over-reached and F'd up completely and now it's a fire sale (like Sears) of brands to raise cash to pay off debt and they'll be left with a shell of a company.  Revenues will drop from $14Bn to $11Bn according to them but I can see why investors are fed up at this announcement.  

    But by fall 2017, when Mr. Polk blamed struggling retailers and paltry back-to-school sales for bleak quarterly results, investors were growing increasingly worried. Shares tumbled by more than a quarter as Wall Street feared larger issues behind Newell’s woes.

    “Put simply, we’ve lost confidence,” Barclays analyst Lauren Lieberman said Thursday in a research note. “Today, uncertainty dominates our thought process.”

    That being said, they did make $1Bn this year and the company is priced at $12Bn at $25 so it's not a terrible p/e – it's just the uncertainty that's killing them. I wouldn't jump on them today (because I don't love them like ALK) but the 2020 $20 puts are $3 and I would consider that free money so I'd say let's watch them and hopefully we get at least $2.50 to put towards a spread – like the 2020 $23 ($5.70)/$30 ($3) bull call spread at $2.70 and then you're in for net 0.20 on the $7 spreads and worst case is owning them for $20.

    DX/Ravi – Of course, hit our bounce goal on the nose (past it now) so I cut the new 4 and 2 of the 10 so now 8 long and break-even is about 90.20.  I didn't know Trump said the Dollar would get stronger or I would've held all the longs a bit longer but still 8 is a good bunch and hopefully we hit 92 without too much stress.

    BREAKING: President Trump tells CNBC the dollar will get ‘stronger and stronger’ & Mnuchin was misinterpreted.

    Scratch/Winston – Certainly not scrapping it when the short puts and long calls get a fill!  I'm sorry we scrapped SAN just because people whined about not getting fills! 

    Oil/CRS – Well $66 was silly and look where they topped out – the universal signal manipulators use to impress their friends that they have total control of a product:

    And check out the contract frenzy for March oil:

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Mar'18 65.88 66.66 65.08 65.23 14:44
    Jan 25

    65.51
    -0.10 696108 65.61 642781 Call Put
    Apr'18 65.65 66.39 64.96 65.09 14:44
    Jan 25

    65.37
    0.01 186157 65.36 237963 Call Put
    May'18 65.29 66.02 64.71 64.82 14:44
    Jan 25

    65.10
    0.07 103905 65.03 180323 Call Put
    Jun'18 64.79 65.52 64.35 64.45 14:44
    Jan 25

    64.72
    0.11 127807 64.61 301727 Call Put
    Jul'18 64.25 64.96 63.91 64.04 14:44
    Jan 25

    64.27
    0.15 46208 64.12 111248 Call Put
    Aug'18 64.00 64.31 63.40 63.51 14:44
    Jan 25

    63.75
    0.17 25826 63.58 82868 Call Put

    As a rule of thumb, it's a problem when they have more than 1Bn barrels in the front 3 months and now there's 1.06Bn and June is stuffed with 301M already so it's going to be a tough roll in a few weeks.  Also, look down strip – no one is taking this rally seriously:

    Mar'19 60.55 60.76 60.24 60.24 14:46
    Jan 25

    60.43
    0.16 6758 60.27 34335 Call Put
    Apr'19

    -
    59.34 59.30 59.31 14:46
    Jan 25

    60.00
    0.16 1399 59.84 16276 Call Put
    May'19

    -

    -

    -
    58.53 14:46
    Jan 25

    59.60
    0.16 2654 59.44 15774 Call Put
    Jun'19 59.22 59.52 59.03 59.09 14:46
    Jan 25

    59.23
    0.17 20391 59.06 91863 Call Put
    Mar'20

    -

    -

    -

    -
    18:17
    Jan 24

    56.77
    0.22 225 56.55 6249 Call Put
    Apr'20

    -

    -

    -
    53.00 17:05
    Jan 24

    56.56
    0.23

    -
    56.33 1169 Call Put
    May'20

    -

    -

    -

    -
    17:05
    Jan 24

    56.34
    0.24

    -
    56.10 1388 Call Put
    Jun'20 56.06 56.10 56.06 56.06 14:46
    Jan 25

    56.13
    0.22 676 55.91 12816 Call Put

    Dollar/EMike – See above, our fearless leader did it.


  53. Jabo / Phil – Dollar-  Ahh, yeah that would do it lol!  Thx


  54. Phil /  DSW – I’ve been looking at this one for a bit.  It’s one of a few US retailers that has not bounced back from the AMAZON effect.  I'm thinking may be a good position.

    On the plus side:

    -Earnings should be moving forward at the mid to high single digits

    -Has good cash flow of 2.5/ sh

    -High insider ownership bout 19%

    -GM at 31%, Op Mgn 9 ( both these were hurt by ebuys) expect this to improve

    -Should see positive gains from tax

    On the negative

    -Purchase of Ebuys was a disaster they took markdowns on this.

    -They are building up their IT and the site is OK but they have more room on this so they are spending money here – it will hurt margins.

    With an at about 15x and earning at 1.6 for ’18 and 1.8 for ’19 this looks like a target price of 25 to 30 is very reasonable.  Am looking at the following:

    ’20 20 / 30 BCS at a net 3.7

    or

    ’20 20 / 25 BCS at a net 2

    while selling the 20  puts for 4.3.

    Would like your thoughts on the company and any hairballs I missed as well as the position.

    Thanks


  55. Phil/ NFLX – hi, i got myself in a costly short (crazy, i know!) on NFLX. I reckoned it had rallied ahead of earnings so much it was almost sure to sell off on the news. So so wrong. Anyway, i sold 6 naked March $190 calls for $35. As cover i bought 5 April $215/230 call spreads for $7. Didnt predict NFLX shooting $50 up to $270 so quick!! I want to receover the loss so am thinking of buying 6 Jan 2020 $240/300 bull call spreads for $35 (only $5 time premium) and gives me more upside cover. I would welcome your ideas on this? As always, thank you. 


  56. And this is why the 5% Rule is so useful. 

    Here's the prediction at 10:57 (above):

    So, if the Dollar is bullish, the weak bounce line (88) will hold and we should quickly recover the strong bounce line of the fall from 96 (89.6 – 40% of that fall) and the next important goal is the weak bounce line (20%) of the fall from 100 to 88 so 12 points is 2.4 is 90.4.  We need to get over that very quickly (by Friday) to remain bullish on the Dollar.

    And here's what happened so far:

    So now, if this is a bullish consolidation pullback off the run back from 88 to 89.6 (1.6) then we expect no more than a strong (40%) retrace of 0.64 to 89.  Below that is back to bearish but if 89 holds, the next move up we look for is to our 90.40 target.

    DSW/Batman – I hate how much inventory they carry (sizes) – it drives me crazy from an operator standpoint.  I don't think competing with AMZN for on-line shoes is a good idea.  The worst thing they could do is find a good model for it and then AMZN can crush them with a copy.  Generally though, a good, boring business but pretty much no growth and I see a $1.7Bn cap at $21.25 and they made $124M last year but the last 4 qs have been $86M, which pushes the p/e to 20 so I'd look at that as more of a base, give them the retail 15x and say $1.4Bn is more fair so 20% down from here is where I think I'd feel good about owning them.  

    Image result for al bundy shoes animated gifSo, if you have a DSW-sized hole in your portfolio, you can fill it by selling the 2020 $20 puts for $4.30 and, frankly, why do anything else.  It's a great return, margin is just $1.86 and worst case is you own them for $15.70 and THEN you can mess around.  If they go lower, I'd stick them in the LTP for all your good reasons but why should I try to aim higher when I can make great money at $20?  

    NFLX/DM – Wow, even I stopped shorting them.  What a juggernaut!  $268 today.  Good job covering with a spread but not much of a payoff there.  The 6 short March $190s are $79 ($47,400) and that's down $44 ($26,400) and you make up a whole $4,000 on the bull spread (better than nothing).  I would focus on making up the loss and not ratcheting up your exposure. 

    You are still expecting a pullback, right, so why spend money to be in the money when all you want to do is cover the loss of a move higher?  Let's say you get 6 of the 2020 $300 ($50)/400 ($22.50) bull call spreads for $27.50 ($16,500) and sell 6 2020 $200 puts for $21 ($12,600) and use that $20 to roll the March $190s to the April $250s at $30 ($18,000). 

    You would be spending $33,300 less the $21,000 you collected originally and, hopefully, the other $4,000 on the April spread, though, at net $12.50, I'd just cash it to be less messy.  So collecting $2,750 means you're in the whole mess for net $9,550 and now anything less than $250 in April is a big winner but you have 18 months to roll and you make $60,000 on the spread if it comes in at $400 so plenty of cushion if it keeps going up.

    If it goes lower, you can cash in and the net of your spread over $9,550 is profit (it's currently $16,500) or, of course, you can sell more short calls and put some of that money into lowering your 2020 long calls to cover and work it for 2 years.  


  57. See,  the Dow is not allowed to go red.  


  58. Phil, F got shellacked today. Thoughts?


  59. Trump has dinner with European corporate leaders – not one woman in the group.


  60. denlundy—would you want to go to dinner with him if you were a woman???? ;-)


  61. NFLX – thanks Phil. I'll give that a try. 


  62. Scratch JO – looking on TOS at the option time and sales (although I admit rarely look at the data and may be interpreting incorrectly) shows how thinly traded JO options are. Looks like Jeff and a couple of others traded 10 options on the 2020 series of 14 calls and 16 puts. A concern would be the lack of liquidity in the options – but it is a great combo if you can get filled. I'm long coffee and rooting for /KC to make an upward move, in that case filling the short calls at those prices will be easier.

    Still, the extremely large width of the bid/ask spreads coupled with the low option volume (I guess the one is a consequence of the other) is certainly a watch out. A shame to get shafted on the way in as well as the way out!


  63. your right jabobeast


  64. I bought the iphone X bad news storyline yesterday and have a few AAPL jun 140 puts. It's a tough bet going against apple, but I dont have much short so I need to pick something!


  65. F/Dhall – That's why we waited before jumping in.  As noted in the CC:

    Ford on Wednesday posted a lower-than-expected quarterly net profit, hurt by rising commodity costs and unfavorable currency exchange rates, and said it expected more pain to come from higher raw material prices in 2018.

     

    Chief Financial Officer Bob Shanks said a lack of fitness at the No. 2 U.S. automaker meant that higher commodity costs stood out more than at rival companies that are hitting their numbers, even though Ford is using many of the same hedging tools and strategies.

    "We have to be far fitter than we are, regardless of what the future is," Shanks said, alluding to a previously announced plan to slash $14 billion in costs over the next five years.

    Referring to other efforts to improve the company's fitness, Hackett said Ford in the past eight months had reorganized the business, streamlined the leadership team and accelerated initiatives in electric and self-driving vehicles, as well as shifting investment to trucks and utility vehicles from passenger cars.

    It's a tricky market down the road with 5-year shifts towards electric and self-driving cars.  Lots of investment that the auto market hasn't really done in decades.  Operating margin is down from 5.7% last year to 3.7% – that's a very rough trend but they did make $2.4Bn (0.60/share) but adjusted for one-time costs it came out to a disappointing 0.39.   Also, due to profit-sharing deal with UAW, they have to pay each employee $7,500.  Still at $45Bn at $12 F makes $6-10Bn – I still like them as a long-term play. 

    You're welcome DM.  

    JO/Winston – Well as I said in the post, if you can play the Futures, you're far better off doing that.  It's certainly not the kind of trade you want to be moving around a lot.  Hopefully they expire in the money and that's that.  

    AAPL/BDC – People are getting spooked by all the negative press but that happens so often into earnings (bad rumors that turn out to be BS) that I wouldn't put much faith in it.




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  73. Good morning!

    Dollar fell back down but bounced above 88 so not bearish yet.  Could go either way so I'm not adding.

    Indexes up a bit but that's usual these days in pre-market.

    Europe is up a bit too.  

    Brent testing $70 is interesting.  If they fail it, we can short /CL, now $65.54

    I guess Winter is over already (new March contract)